How to make the first million? - LSE Home

1 How to make the first million ?How to create a company?Leszek Czarnecki, PhDLondon, October 2011 Graduated from Wroclaw University of Technology (Faculty of Sanitary Engineering)Graduated from Wroclaw University of Economics (Faculty of Computer Science and Management)Founded commercial diving Fundusz Leasingowy ( IPO 2000) leasing Europa ( IPO 1999) insurance Bank retail Bank (IPO 2007) private Bank corporate Finance ( IPO 2011) financial Broker real estate advisory3 Leszek Czarnecki, PhD 4 Leszek Czarnecki, PhD 9. LC CORP. ( IPO 2007) property development company10. Getin Holding ( IPO 2001) the biggest Polish private financial holdingAnd 20 other smaller firmsPositions held: CEO of EFL Acting CEO of Polbank CEO of Cr dit Agricole Poland CEO of TU Europa CEO of Getin Bank CEO of Getin Holding5 The first millionJohn D.

2 Rockefeller (1839-1908) in 1870 with three partners founded the Standard Oil Company. Rockefeller paid his employees more than the competitors and awarded all ideas that improved company s managementThe company used natural resources in an extremely efficient way, and all the waste products were carefully reused. Due to this policy Rockefeller gained almost complete control of the oil refining industry in 1880, refining 85% of oil in the Poland, due to the inflation it was much easier in the 80-ties. 100 US dollars was equal to one million Polish : Rockefeller Archive Centre6 Determinants of successA SYNERGY OF THREE ISSUESSUCCESSBEST PEOPLEGOOD IDEACAPITAL7 Entrepreneur Is aseller Carefullyobservesthe world Has a uniquecombination of analytical and synthetic capabilities Emotional intelligence(EQ) is more valuable than intelligence (IQ) Easy going person withability to make relations Is a naturalleader Works hard When creating a companydo it by yourself or with just one partner(unless you have more than 50% of the shares.)

3 The risk of conflict with 3 partnersis 3 times bigger than with 2. With 4 partners the risk is as high as 6)8 Entrepreneur has to have abilities of a sportsmen Long term training minimal effects Regularity is more important than sudden bursts Spirit of competition Immune to failures as they happen more often than successes Team work, friendship9Is formal education necessary in business? Bill GatesPaul AllenAndrew CarnegieSteve JobsOn the other hand, Robert Merton and Meyron Scholes with their Identificationof existing but not fulfilled needs( removing snow from streets or roofs there are such services but the demand is higher than the supply) Foreseeing and creatingnew, as yet unknown needs ( iPod or Tax Care) At the very beginning an entrepreneur is the one that works the most and without pay. So the business model must be profitable from the first day (the concept that losses are acceptable during the first years is nonsense an entrepreneur sells his work A company has to operate with a high margin there will be a lot of mistakes at the beginning, therefore a safety net is required11 Financing When starting a new business be ready for the worst.

4 You will not succeed and will lose everything, so don t start in debt. Invest your time, your own or your family savings, invest money you can afford to lose Do not take a loan (or at least not as a private person) because at first you will be spending somebody else s money but later paying it back with your own Aid funds are a good idea As long as you can finance your operations with the profits Think about loans when you are sure your prognosis of the market, you re planning to do business in, is correct. Be sure that the standardsof services provided by your company are high. And make sure that you have a stablebase of suppliers and customers 12 Mediocre idea, good management and financingSystem of satellite phones, 19926bn USD wasted13 Good idea, good financing, bad managementDean Kamen and Segway, idea, good management, lack of capitalThe credit card was invented by John Biggs in 1946, but Frank McNamara was the first one to introduce it to the market in 1950 via American Plan Business idea (margins) Market and competition Marketing mix Investment and operational costs People Sources of financing Legal and tax issues Stress tests16 Next steps Employ people that will do the simple tasks which consume a lot of your time and are not profitable Standardise the business and develop the scale.

5 Create a network let it work for you Think about a partner or selling the company when it s growing less than 10-15% a year. And even then think what you will do afterwards Work and life balance is important (it s bad if business replaces your family)17 Maslow s hierarchy of needsStabilityEsteem needsBelongingness and love needsSafety needsBiological and physiological needsWhy do you want to start the business?What is on the top of your pyramid?Getin Holding GroupThe most dynamically growing financial group in Poland19 Who are we?The biggest Polish firm with private capital, according to market value, own capitals and 8 years the we have developed from a small company employing a few people into one of the biggest, most dynamic and fastest growing financial groups in Poland. Major areas are: Banking Financial advisory Insurance Leasing Brokerage houseWe also operate in Russia, Belarus and UkraineAs far as capitalisation is concerned we are the 15th company listed on the Warsaw Stock Exchange (8bn of PLN in capitalisation)Our investments are well perceived by the market when we acquired MW Trade the price of its shares went up 120% within 2 months after the business model and competitive edge Organisation focused on results A well qualified and motivated management team High efficiency and low costs culture An effective and constantly growing sales network Very good execution of tasks Efficiency in the management Simple business model Fast decision making process Good understanding of the market we operate on Careful and proper risk management Zero tolerance for losses Focused on the core businesses (no speculation rule)

6 Opportunist attitude toward acquisitions 21 Getin Holding Group s structure as of June 2011 Banking(retail, private and commercial) InsuranceForeign companiesLeasing, brokerage house, investment fundsRussia, Ukraine, Belarus22 Development of Getin Holding GroupNet profit of the company s shareholders (PLN m)Total assets (PLN bn) 1H 2011 Employment (FTE)27282984336042815802560179288869200 42005200620072008200920101H 201123 Dynamic growth is our goal1 Financial advisory (Open Finance)1 Car loans market (GNB)1 Bancassurance (TU Europa)2 Mortgage market (GNB)2 Life insurance market (TUn Europa)Quick growth requires employmentgrowth very dynamic during the last sixmonths Our efforts are valued by customers andinvestors24 Where can you find us? 678347144 Number of branches in each countryPoland: GNB, OF, Idea Bank, PDK25 What do analysts think about Getin Holding?

7 Goldman SachsCredit Suisse Getin is the most dynamically growing bank among those assessed by us Since the beginning Getin has been increasing its market share due to its organic growth, as well as acquisitions The competitive edge of Getin is its business model and its flexibility to adjust the offer to market s needs We think that the market undervalues the growth potential of Getin We expect that Getin s market share will increase above average We expect an 89% increase in profits Market share in new sales in 2007 2008 was higher than market share based on the portfolio size Getin will have the best profitability with lower reserves We think that the cost base will remain under constant control, and the costs will grow slower than assets26 Business is like a road movie. Each trip, even the longest one, starts with the first stepTAN -1985 EFL 2001 Getin Holding 2011